Economists largely expect GDP to still contract in 3Q, but in low single digit

KUALA LUMPUR (Nov 9): Malaysia’s gross domestic product (GDP) in the third quarter (3Q) of 2020 may contract by as much as 3% or grow by up to 1%, according to economists interviewed by

UOB Malaysia’s senior economist Julia Goh said she expects the economy in 3Q to either shrink by up to 1%, or grow by up to 1%, depending on the pace of the services sector’s recovery.

“The export-oriented sectors, particularly electrical and electronics (E&E) and rubber products, provided a lift.

“The relaxation of Movement Control Order (MCO) up to September allowed for some recovery in domestic tourism and retail, while passenger car sales improved, thanks to the tax incentives,” she said.

However, she expects construction activity to remain weak, and opined that the tightening of movement restrictions across wider swathes of the country could likely weigh on sentiment and slow down recovery.

Meanwhile, AmBank Group chief economist and head of research Dr Anthony Dass expects the GDP in 3Q to contract by 2% to 3%.

“The second quarter is the worst, we expect the 3Q GDP to have a good rebound on a quarterly basis,” he said.

Concurring with Goh, he believed that in 3Q, the economy has benefited from the relaxation of the MCO, which has led to improved consumer demand and businesses.

He also noted that the economic stimulus packages announced by the government — Prihatin, Prihatin SME+, Penjana and Kita Prihatin — worth a total of RM305 billion, started to kick in during the quarter.

He added that meanwhile, exports during the quarter have also improved due to the easing of trading restrictions globally.

Lifted by E&E shipments, Malaysia’s exports rebounded by a double-digit growth of 13.6% to RM88.93 billion in September.

For 3Q, Malaysia’s exports increased by 4.4% year-on-year to RM260.62 billion. Compared to the second quarter, the exports in 3Q rebounded by 24%.

Sunway University economics professor Dr Yeah Kim Leng also expects GDP to contract in 3Q, by a low single digit.

He opined that production and consumption have turned around following the relaxation of the MCO, and exports have also picked up in 3Q.

“The resumption of economic activities should sustain gradual recovery in GDP growth,” he added.

Malaysia will be announcing its 3Q GDP performance this Friday.

The country’s GDP contracted by 17.1% in the second quarter of 2020, the lowest recorded since the fourth quarter of 1998, mainly due to the MCO enforced during the quarter to stem the spread of Covid-19.

This has prompted Bank Negara Malaysia to revise its official GDP forecast for 2020 to a contraction of between 3.5% and 5.5%.

In the Economic Report 2021, the Ministry of Finance expected Malaysia’s GDP to contract by 4.5% in 2020, before rebounding to growth of between 6.5% and 7.5% in 2021.

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